Office construction activity in Saudi Arabia, whose Vision 2030 plan includes generating millions of jobs and building mega projects, has slowed down over the last one year primarily due to the coronavirus pandemic.
Developers in the kingdom completed 150,000 square metres of office gross leasable area (GLA) during 2020, representing a 67 percent decline from the average office space delivered over the past three years, according to JLL’s new report released on Tuesday.
“The office sector witnessed muted activity across Jeddah, Makkah, Riyadh and Dammam Metropolitan Area (DMA)- the four main cities in Saudi. Construction activity on office developments slowed down,” JLL said.
Going forward, there aren’t many encouraging signs that the trend could be reversed. According to JLL, corporates are expected to continue integrating and optimising a hybrid working model to ensure their employees’ safety. This includes a combination of remote and office working.
While the office sector was somewhat subdued, construction activity within the residential sector has been quite active.
In 2020, around 60,000 units were handed over, bringing the country’s residential supply to 1.3 million and 835,000 in Riyadh and Jeddah, respectively. In Makkah and DMA, the total stock stands at 400,000 and 363,000, respectively.
JLL noted that demand for the kingdom’s residential properties remained active in 2020, thanks to the strong government support for the sector. This was evident in the high mortgage rate last year.
From January to September 2020, the number of loans increased by 84 percent, while loan values were up 90 percent over the same period a year earlier.
Overall, JLL said the property market is still expected to remain buoyant this year due to “government’s focus on balancing growth and stability”.
“Even though there are sectors in KSA’s property market which remain challenged as a result of COVID-19, the government is looking beyond the implications of the pandemic by continuing to support a number of measures and by investing massively in various projects to achieve its Vision 2030 goals,” said Dana Salbak, head of research, Middle East and North Africa, at JLL.
Saudi Arabia’s Vision 2030 seeks to wean the domestic economy off oil and raise non-oil revenues to $267 billion by 2030.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
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